Tax Cuts for the “Rich” (Ten Men in a Restaurant)

I was having lunch at a great restaurant with one of my favourite clients last week and the conversation turned to the government’s recent round of tax cuts. “I’m opposed to those tax cuts,” the retired university teacher declared, “because they benefit the rich. The rich get much more money back than ordinary taxpayers like you and I and that’s not fair.”

“But the rich pay more in the first place,” I argued, “so it stands to reason that they’d get more money back.” I could tell that my friend was unimpressed by this meager argument. Even university teachers are prisoners of a myth that the “rich” somehow get a free ride in Canada. Nothing could be further from the truth.

Let’s put tax cuts in terms everyone can understand. Suppose that every day 10 men go to PJ’s for dinner. The bill for all ten comes to $100. If it was paid the way we pay our taxes, the first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12, the ninth $18. The tenth man (the richest) would pay $59.

The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve. Since you are all such good customers, he said, I’m going to reduce the cost of your daily meal by $20. Now dinner for the ten costs only $80.

The first four are unaffected. They still eat for free. Can you figure out how to divvy up the $20 savings among the remaining six so that everyone gets their fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody’s share, the fifth man and the sixth man would end up being paid to eat their meal. The restaurant owner suggested that it would be more fair to reduce each man’s bill by roughly the same amount and he proceeded to work out the amounts each should pay.

And so the fifth man paid nothing; the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of $59. Outside the restaurant, the men began to compare their savings.

“I only got a dollar out of the $20,” declared the sixth man pointing to the tenth. “and he got $7!”

“Yeah, that’s right,” exclaimed the fifth man. I only saved a dollar too. It’s unfair that he got seven times more than me!

“That’s true,” shouted the seventh man. “Why should he get $7 back when I got only two. The wealthy get all the breaks.”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor.”

The nine men surrounded the tenth and beat him up. The next night he didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They were $52 short.

And that, boys and girls and college instructors, is how Canada’s tax system works. The people who pay the highest taxes, get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table any more. There’s lots of good restaurants in Switzerland and the Caribbean.

 ***

 This is an allegory adapted from one published years ago in a Chicago Newspaper

 Thanks for listening to Charles Adler 

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6 thoughts on “Tax Cuts for the “Rich” (Ten Men in a Restaurant)

  1. This is an excellent analogy. The only problem I have with it is the instructors at my post secondary institution would have argued that the rich man should never have been “allowed” to get rich in the first place. Needles to say, I was surrounded by a cesspool of socialism during my post secondary education.

  2. I’m sorry Mr Adler on most subjects I would agree. It isn’t that the “rich” individuals should pay more I’ve never thought that. It’s more that the people that support these people are undervalued. It’s more that the florists, mechanics, military people and any other vocation you can name are undervalued. It is more that product distribution is frozen. It is more because 4 of the men in your ten were being robbed. It is time for a ratio based economy that doesn’t worship the capitalists or charismatic types but rather serves them. One in which the traits listed are valued but in a reasonable way. Not dismissed as in communism or worshipped as in capitalism but responsibly valued as with all others a value added capitalism.

  3. The tax system isn’t even fair for “The Rich”.
    Being a realtor, my income fluctuates dramatically from one year to the next.
    This year I expect to gross 4 times the commissions I earned last year. This will put me into the highest tax bracket for my last 4 month’s earnings. Last year I was in about a 20% tax bracket. Over a five year period I pay much more tax than someone earning the same total amount. I have no job security and no company/ union pension. With a huge mortgage, two college/ university entrance kids, minimal RRSP’s and still working 6-7 days a week at 67 years old, it is hard not to feel abused by our civil service tax department.
    There is something seriously wrong with our tax regulations when I feel forced to cut back on my earnings potential because I will only get to give my family less than 50 cents on the dollar!

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    john smith on

    This is really stupid and I’ll explain why. Let’s break it down:
    1-4 = pay $0
    5th = $1
    6th = $3
    7th = $7
    8th = $12
    9th = $18
    10th = $59

    Let’s say you work at a radio station in the sales department, and that radio station is ranked #1 for Adults 25-54. As a commissioned sales rep selling the top rated station, it will be easier to speak with a majority of the business as they will likely recognize your station, because it is the most popular. And even more so, National advertisers who buy on ratings, will likely give you more of their advertising $$$ because of the ratings your station is delivering.

    However, let’s say you get an other to go and work for the #4 ranked station… Maybe they offer higher commission rates or you have a friend there that tells you it’s a better place to work.
    It will be much harder for you to bring in those big sales because your new #4 ranked station does not have the ratings the #1 station you used to work for does.
    Yes you are a good sales person, but now you’ve just realized that a BIG reason for your income was the station you were working for. Not soley your ability. You just realized how arrogant that you were to think that your success had nothing to do with the environment you were working within.

    here’s a more specific example. If Ikea spends $100k in your market per month. They will give a majority of their advertising $$$ to the station ranked highest in their target demographic objective. As a sales person, you will not change that. You will receive the highest portion of the buy when selling the #1 station, but will receive far less when sell #4 ranked station.

    Get it?

    The reason why the rich are rich is because they live in a Country that supports it. Try moving to Haiti and becoming as rich there or maybe Cuba.
    I have no problem if you someone is filthy rich, however they need to play by the rules and pay their fair share into the continued devolpment of our society.
    Our society allows people to be rich. Without the middle class, there is no rich and for sure no Super Rich. There is only poor.

    yes Charles, the man paying $59 is very important, no one is denying that. However he wouldn’t have $59 to spend if it wasn’t for the other $9 men helping him earn that money.

    If the first 9 men did not have $41 collectively to contribute, the 10th man would not $59 either, he would be in the same boat.

    Opportunity for wealth comes from the strength of a middle class. If the middle class is weak and strugling, the rich and super rich will crumble.
    If a station has no ratings and no one is listening to it, you as a radio salesman, will make no money. You need the ratings and support of the station to make your wealth.

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